I think Ueshiba had great ability in his prime, but with everyone as they age is going to realise some decline in ones "powers" whether internal or not.... as for the arm waving episode I think he was probably having a giggle at our expense or he had become a tad bit delusional himself?
The other explanation is the "respect" given him from his uchi deshi that they respected his past ability and wisdom.....
To go in a destroy an old man wouldn't have been that pertinent or socially acceptable given his advanced age? For crying out loud when are people going to realise that? It really beggars belief....